In-depth: How ambitious are Fit for 55’s energy files?

Just how much is a 36% energy efficiency increase, and what exactly is renewable hydrogen? ENDS takes a look at some of the biggest questions raised by the energy proposals in last week’s Fit for 55 package.

An electrolyser under construction in Leuna, eastern Germany, earlier this year. Renewably sourced hydrogen has been included in the RED proposal. Photo: Jens Schlueter/AFP via Getty Images An electrolyser under construction in Leuna, eastern Germany, earlier this year. Renewably sourced hydrogen has been included in the RED proposal. Photo: Jens Schlueter/AFP via Getty Images

When they agreed on the text of a new climate law in April, the European Parliament and the 27 governments represented in the EU Council committed themselves to an unprecedented overhaul of the continent’s energy system. Europe’s greenhouse gas emissions fell by 24% between 1990 and 2019. The 52.8% de facto target for 2030 means the EU is now legally bound to achieve a reduction in greenhouse gas output this decade that exceeds what was seen in the preceding 30 years.

On the one hand, sources of energy must change, with fossil fuels marginalised. On the other, consumption must fall. Central to driving this change will be EU policy embodied in the Renewable Energy Directive and the Energy Efficiency Directive. For the sectors not covered by emissions trading, the Effort Sharing Regulation will set the sectoral targets for governments to pursue, while the Land Use, Land Use Change and Forestry Regulation will settle the key question of the role of Europe’s natural carbon sinks.

How far must Europe cut its energy use?

The Energy Efficiency Directive (EED) is arguably misnamed. EU energy performance standards – regulations that genuinely address the efficiency of products like fridges – lie elsewhere, in soon-to-be-expanded ecodesign rules. What the EED demands is a reduction in energy use across Europe. But by how much?

The commission has proposed increasing the 2030 efficiency target by 3.5 percentage points to 36%. The target refers to deviation from business-as-usual projections of energy use made in 2007 using the ‘price-induced market equilibrium system’ (PRIMES) model. This method is retained in last week’s proposal, but it also incorporates a 2020 update that says Europe will be consuming energy at a rate equivalent to 864 million tonnes of oil a year by 2030 (1,124 Mtoe in terms of primary energy input).

Under the new model, the EU must come in at 9% below that level, or 787 Mtoe (and 1023 Mtoe in primary energy input) in 2030. Comparing this to energy use in 2019 – the most recent data available – the EU must cut its final energy use by just over a fifth (20.5%), and primary consumption by a quarter.

“The level of ambition proposed is in the low range of what was modeled in the Climate Target Plan,” notes Arianna Vitali Roscini, secretary general of the Coalition for Energy Savings. “The introduction of a stronger governance with a binding EU 2030 energy efficiency target, and a gap filler mechanism, has the potential to drive additional action and ensure stronger implementation of the overall energy efficiency framework.”

The commission has proposed no binding national targets beyond the Article 7 obligation to achieve an annual reduction in final energy consumption of 1.5%, a near doubling of the current energy savings requirement. Even compounded over a decade this falls some way short of the EU level target. Some countries will have to cut back a lot more.

The hydrogen question

Few topics in EU energy policy have sparked as much debate as hydrogen, which only a few years ago was a niche energy vector seen as a potential way to decarbonise steel production, and an ‘also ran’ in the race to clean up road transport. Now this lightest of gases has its own EU strategy that foresees H2 as the carrier for 14% of final energy use by 2050. The most heated debate centres on how ‘green’ that hydrogen will be. The proposal for a second revision of the Renewable Energy Directive (RED) answers part of the question.

Alongside a headline target of 40% for renewable energy in final consumption – an increase of eight percentage points on the current 2030 goal – the RED III extends the definition of ‘renewable fuels of non-biological origin’ (RFNBOs) beyond the transport sector to all uses, thus including industrial processes and even home heating. “The additionality criteria that apply for the use of RFNBOs in the transport sector are extended to their use in other sectors as well,” a commission official told ENDS. This means that for hydrogen to qualify as ‘renewable’ under EU law, it would have to be produced using additional renewable power infrastructure, such as dedicated wind turbine deployment.

The trade association Hydrogen Europe told ENDS it agrees with the definition of renewable hydrogen derived from the hydrogen strategy. So-called low-carbon hydrogen derived from other sources – including fossil fuels – was addressed in other parts of the Fit for 55 package, but its regulation will depend largely on forthcoming policy proposals.

“The basis for the cleanliness of hydrogen is the threshold that will be published by the European Commission with regards to the taxonomy of sustainable investments,” a spokesperson for Hydrogen Europe said. “The exact threshold will be [the] object of a delegated act which we are awaiting to be published. However, we advocate a quite ambitious level of decarbonisation with up to 90% of CO2 reduction.”

Many environmentalists are deeply suspicious of low-carbon hydrogen, which they believe oil and gas companies are promoting – in combination with carbon capture and storage – as a means to maintain demand for their products. “It would have been absurd to allow fossil fuels to be labelled as ‘renewable energy’ and so we are encouraged that the European Commission resisted the heavy lobbying from gas industry lobbyists to include fossil hydrogen in the Renewables Directive,” said Tara Connolly, a gas campaigner with Global Witness.

However, she criticised the recognition of low-carbon hydrogen elsewhere in the package, notably provisions in the proposed revision of the Emissions Trading (ETS) Directive that would allow producers to receive free CO2 allowances. “But what the commission took away from industry with one hand it gave back with the other. This has resulted in a contradictory hydrogen policy that will only be further exploited by fierce lobbying from the gas industry.”

The European Commission has made it clear the onus is on energy firms to prove the viability of technologies such as carbon capture to decarbonise fossil gas, a position reiterated by director-general for climate action Mauro Petriccione in a recent interview with ENDS. In an interview to be published on Friday, the new president of lobby group Eurogas tells ENDS the industry plans to go carbon neutral before 2050, whereafter there will be no “unabated” gas in the EU’s energy system.

Binding national targets

One aspect of the proposed reform of EU energy and climate policy that was met with relief by campaigners was the retention in the Effort Sharing Regulation (ESR) of a system of binding national targets for emissions reduction in sectors so far not covered by the ETS – agriculture, waste management, transport and buildings – despite a proposed extension of emissions trading into road transport and real estate and a linking of agriculture to carbon sink policy. Initial policy ideas had included a scrapping of the ESR, which might have meant the end of the last nationally binding climate targets.

“The new ETS would complement the ESR in the current scope, which maintains incentives and accountability for national action. The importance of the latter has also been voiced by a large number of stakeholders,” reads the commission’s introduction to its ETS proposal.

Another proposal with the potential to shift the bloc’s renewable energy balance – currently dominated to the tune of 60% by biomass, of which three-fifths is in turn sourced from forests – are proposals to amend the LULUCF Regulation. The transition will be gradual, however. From 2026, member states will each have an individual target to increase the size of their natural carbon sink with the aim of ensuring that at least a net 310 million tonnes of CO2 are removed from the atmosphere each year by 2030. From 2031 onwards, farming would be merged into a broader Agriculture, Forestry and Other Land Use (AFOLU) policy, with the aim of achieving net climate neutrality by 2035.

The months ahead

While the headline targets for renewable energy and energy efficiency, and indeed the carbon sink, have not provoked the same immediate kick back from lawmakers with a wary eye on their voters – and memories of the gilets jaunes protests in France – their adoption as proposed is far from a given.

Commission vice-president Frans Timmermans and other officials have repeatedly stressed that the EU institutions are, for the first time, legally bound to achieve their climate target, in this case 55% net by 2030 and climate neutrality twenty years later. A reduction in climate ambition in one file will necessarily mean an increase in another.

robert.hodgson@haymarket.com

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